The £600bn rescue 'that's no more than a painkiller': Doubts grow over rescue deal for the euro

Doubts were growing over a planned rescue deal for the euro last night as EU chiefs admitted it would not heal the currency’s problems.

Officials questioned whether a plan to use the eurozone’s limited bailout funds to buy Spanish and Italian debt could stem the crisis, calling it ‘financial paracetamol’.

There is anger in Germany that other countries at the G20 summit in Mexico appear to have tried to bounce Chancellor Angela Merkel into agreeing to the scheme.

There are concerns at the G20 summit that rescue plans for the Euro are just 'financial paracetamol'

Mrs Merkel left the summit without conducting a planned press conference after details emerged of the plan to use two European rescue funds, worth a combined £605billion, to help reduce spiralling interest rates charged on government borrowing by debt-stricken countries.

Britain and the US suggested there had been signs of movement from Mrs Merkel, who has been fiercely resistant to using more German taxpayers’ money to bail out troubled southern eurozone members.

French President Francois Hollande went further, saying he expected a request from Spain to the European Financial Stability Facility – one of the eurozone’s bailout funds – by the end of the week.

The scheme would see the EFSF and another fund, called the European Stability Mechanism, used to buy up government bonds from Spain, Italy, Greece, Portugal and other struggling euro members.Effectively, it would mean Germany and other wealthy countries in the currency, such as Holland, agreeing to underwrite struggling members.

French President Francois Hollande, German Chancellor Angela Merkel, Italian PM Mario Monti, Spanish PM Mariano Rajoy, US President Barack Obama and European CommiSsion President Jose Manuel Durao Barroso discuss the eurozone at the G20 summut

Mrs Merkel, speaking on her return to Germany, said bond buying was a possibility but there were ‘no concrete plans’. David Cameron and George Osborne have been arguing for months that only such a system of ‘fiscal transfers’ can save the euro from collapse.

The Prime Minister, speaking in Mexico City yesterday, expressed frustration that eurozone leaders only acted when their currency was on the brink of disaster.

He said: ‘I am confident that they know how serious the situation is and they know that if they don’t use all the instruments, all the institutions of the eurozone to stand behind their currency, they will face problems.’

German Chancellor Angela Merkel and Prime Minister David Cameron listen on during the G20 Summit in Mexico

Mr Altafaj said: ‘It would be financial paracetamol. It could soothe tension, pain and malaise... but it does not heal the root causes, the structural problems of the economies of Italy, Spain and others.‘It is not a substitute for structural and economic reforms that can boost confidence.’

Some financial experts also questioned whether the plan would be anything more than another sticking plaster for the eurozone’s struggling economies.

But Spanish borrowing rates fell below 7 per cent – the danger point at which Greece, Portugal and Ireland had to ask for bailouts – for the first time in a week yesterday on hopes the scheme might come to fruition.